tv Wall Street Week FOX Business May 26, 2017 8:00pm-8:31pm EDT
have a great memorial day weekend. thank you for joining me the last two nights. louis back tuesday. he's got some very big guests lined up. i will see you on "the intelligence report." good night from northern. >> announcer: from fox business head quarters in new york city the new "wall street week." maria: welcome to "wall street week," the program that analyzes the week that was and positions you for the week ahead. former u.s. treasury secretary larry summers is my special guest. the trump budget request calls for a reduction to the spending growth of several programs. democrats say the plan deprives the nation's poor of key services. >> we are not kicking anybody off of any program who really needs it.
we don't have enough money to take care of everybody who doesn't need help. maria: joining us is former u.s. treasury secretary under president clinton, larry summers. good to see you. i read a fair amount of what you have been saying about the president's budget. you simply call this ludicrous. why? >> it's the least honest, incompetent budget that's been put out in 40 years. there are value judgments about the poor. i don't agree with those value judgments. they were elected and they have a right to make their value judgments. there are optimistic economic forekations. they are further away from the professional consensus than any. but they are not entitled to
violate the laws of arithmetic and logic and that's what this budget does. let me explain. they have a tax cut. they think their tax cut will spur the economy a great deal and that will generate extra revenue. i don't think they are right. that's their assumption. fair enough. that's why they project a big acceleration in growth. that's now part of their baseline. based on their tax cut they have a very optimistic baseline. fair enough. they don't get to then say that their tax cut pays for itself because of the extra growth that it generates since that growth they already took account of in the baseline. to do that would be double counting. alternatively, if you want to take account of the benefits through tax cutting you have to
take account of the costs of your tax cutting and they didn't do that in the budget. so it's just double counting. it violates the lawsuits of arithmetic. -- it violates the laws of arithmetic. they could say they are going to raise taxes $1 for every dollar they cut taxes. but if you listen to everything donald trump said for the last 15 months. everything secretary mnuchin said since he took office. that's not what they have said. they said they are going to cut taxes and that's going to be what grows the economy. so this is a step out of arithmetic and logic. that's a different thing at least for me than empirical
assumptions and value judgments or judgments about data that aren't judgments, that i would share. this is an extraordinary and i have to say, dishonest thing. >> let me drill down a couple of the points. the 3% growth projections they have. they have a projection of 2.5% for 2018. they are expecting 3% to pay for this as you say. what would the impact of a sharply slower corporate tax be? do you think that dictates behavior? if you have got a corporation paying 35% and will ultimately pay 25%. 15%. but at 20% or 25%, won't that dictate behavior in terms of investing more in business, hiring more people.
lowering taxes in terms of an individual in terms of spending more and generating the growth they are looking for. >> two things are important to recognize. one is we already have an economy with a 4.4% unemployment rate. so the scope to get more growth by generating more demand. maria: you are talking about the jobs number versus the growth number. >> in order to produce more gdp you are likely to need more people working, and we are kinds of there, most way there in terms of employment. 3% seems like a kinds of normal number. the thing is that for many years, we had a population of adults that was growing at 1% plus a year, and we had a big trend towards more women working. that's over. both of those things are over.
the women are work already. the adult populations are growing very, very slowly. even if we went back to good productivity performance, we wouldn't have 3% growth over the long term. but you asked about the incentive effects of corporate tax cuts. on balance we should find a variety of reforms with respect to repatriation. but here are some things your viewers should think about. cost of capital are now close to zero. interest rates have never been lower. corporations are sitting with huge quantities of cash in treasury bills paying nothing. if they had attractive investment projects even with today's tax rates, they would take them. you like many other people quote the 35% corporate tax rate. that's the statutory tax rate it
doesn't take account of a lot of loopholes. the actual rate is between 15 and 20%. the actual rate is pretty much at the average of the industrial countries. it's above the cayman islands. but if you look at the countries we compete with, it's about the same thing. it will be like 10 basis points than it's going to be like 1 percentage point. if they want to make that assumption and make it explicit in their budget, that's fine. but they don't get to count the growth benefit within their budget and not count the fact that the corporations aren't paying taxes and calculating the budget. maria: the white house has taken in the your critiques and respond. >> i went back and looked at
some of the economic assumptions that obama administration made in its first couple of years. and i want to say on a couple of different occasions their assumed growth rate was more than 4.5%. this is the first administration in history -- it was the first decade in the first 8-year period in history not to have a 3% growth rate. yet they were promising 4%. if you talk about my 3% and his 4.5, we'll talk about who is closer to reality. >> director mulvaney is being dishonest. we had -- yes, at an unemployment rate of 10.8%. an unemployment rate of 10%, where there was huge amounts of room for the economy to grow. we did what he administration
except this one has done for 40 years. we took the economic growth forecasts of the congressional budget office, the blue chip consensus of professional forecasters of the federal reserve. we took the consensus economic forecast and we used it. the consensus economic forecast was starting from a big recession for rapid growth. and we used that forecast and we along with the consensus were wrong. but that's very different. he's suggesting that we had used the same practices as their practice. they are the first to depart from what the whole big world thinks. we knew when we were in government that we were going the wipe out programs a lot and think we were going to do fantastic things. so we disciplined ourselves by
saying that our forecast had to follow the outsider forecast. and he knows that. and he knows that he's in an entirely different place of following -- of not following the professional consensus. and he's just trying to muddy the waters. yes, our forecasts were sometimes too high and sometimes too low. be in can forecast the economy precisely. the question is, do you try to make an honest forecast by using outsiders, or do you try to create your own narrative that isn't supported by any outsiders. it's a good analogy. companies get to report their financial statements with the awed towards or without auditors. with accountant or without accountants. maria: this is a policy blueprint and obviously it will
get marked up. this an idea from the president and then it will go to capitol hill and get marked up. so this is not the budget it's going to be after going through congress. >> thank god this budget is going to be marked up. but all previous budgets have been internally consistent, honestly accounted for statement of the president's vision. this is a assumption about growth without recognizing in the budget the thing that's supposed to generate the growth in the form of tax cuts. and this is a forecast in terms of growth that has no external validation. maria: i'm going to take a break. when we come back i'm going to ask, do you think regulatory reform and tax reform will stimulate growth. a simple question, and how do you do it. stay with us.
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maria: president trump's plan to spur the economy focuses a lot on tax reform. his administration is pushing for a lower tax rate and simpler tax code for individual. larry summers is putting aside delays this plan may have. the tax plan the president put on the table differs slightly from what's on the table in the house. he put a budget. it's one page long. that's not a plan.
the internal revenue code is 74,000 pages long it's an extraordinary thing. the first 100 dare -- days are . never in history has the treasury secretary announced. maria: obama never balanced the budget. the president is trying to balance the budget. >> he's not trying to balance the budget. he's making up numbers that do not respect the laws of arithmetic to show a balanced budget. he's not telling you what his policies are. a budget that does not include tax policies is like a business plan that does not include capital spending.
maria: he's got infrastructure investments, expand veterans choice programs. new parental leave program. border security. then we have got the key spending growth cuts medicaid, children's health insurance program. food stamps. student loan program changes. disability programs. do you not agree with any of this? >> the projected total -- the projected total of the budget deficit over the next 10 years is $5 trillion. the current projected deficits are many trillions of dollars. these cuts do not come close to adding to anything like those numbers of trils of dollars. do i support gutting medical care for poor children? no, i don't support gutting
medical care for poor children. medicaid and children's health insurance programs. maria: the growth of those program. >> he's cutting the growth, medical care costs go up in america, they go up because there are more costs, there are more types of things we can do to cure people. so we have more medical care. we have an estimate if we are continue to provide state of the art medical care for poor children how much that costs. he if you look at the detail of how this is done, it is taking children who now have health insurance and causing them no longer to have health insurance. no, i do not support taking poor kids away from having health insurance. if we can finds ways. maria: he's talking about cutting the growth in the future. he's not taking anything away.
>> you are not right. in order for all the children who are now covered to continue to be covered, costs need to grow. so, yes, by slowing the growth rate -- by sloag the growth rate, he is removing children, poor children from access to healthcare. the cbo kamente calculated witht to his healthcare plan that he was going to take 20 million people off of health insurance. bar require want to talk about regulations, the rollback and i want to get into china. >> announcer: rewriting bank regulations. a practical way to boost growth in america?
>> a number of regulators have talked about problems with the local rule which is intended to prevent banks from doing proprietary trading on their own account. maybe there are ways to make it stress testing of banks, a way of assessing how much capital they have during a particularly tough period is important. but maybe there are ways to make that less onerous for banks. maria: that was ben bernanke telling me there are some areas where washington could lessen the burdens of regulations on the financial services sector.
larry, what do you think about that. the president has made a big deal out of the fact he wants to roll back regs. in oil it takes forever to get new deals done. and he says that will contribute to both. >> he's right. you have to be smart by the. you can't roll back essential protections. there is a ton of regulatory streamlining that we should do. there is no need for hundreds of people to be inside each our major financial institutions. it's a particular problem for community banks it's part of the reason we have such scene infrastructure problem because there are so many approvals necessary that nobody can get anything done. you have got to find the right bag on the environment. there is a lot that needs to be done.
maria: what is most onerous that could be an easy fix. look at dodd frank. >> there are things within dodd-frank that should be looked at. i think some of the details limitation on how they run their businesses, i don't think those ideas have proved out in a terribly effective way. sow i think we should relax and balance some of that regulation. there is also a shadow bank system that we don't do a good job of regulating. we have a streamline process for substantial infrastructure investments. new airports and highways. bridges. they would create jobs, and we certainly could val intli streamline. there is a bridge outside my office 300 feet long.
they have been repairing it for five years. in china they would repair a bridge like that in five days. maria: larry summers great to see you. over 400 medications can cause a dry mouth. that's why there's biotene. biotene can provide soothing dry mouth relief. and it keeps your mouth refreshed too. remember while your medication is doing you good, a dry mouth isn't. biotene, for people who suffer from dry mouth symptoms. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums?
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maria: look at some of the big events in the week ahead that could impact your imloin. markets are closed for memorial day monday. consumer confidence, auto sales and the april jobs numbers are the my knowledge economic indicators to watch for in the week ahead. we know what's gone on in retail south will be important to see a window into how michael kors and lululemon are doing. coming up next week, joins.
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